PGG Wrightson first-half result boosted but uncertainty remains

Farm services company PGG Wrightson saw its first-half profit
boosted 55% to $4.8 million, but ongoing uncertainties in the
agricultural sector prevail for the remainder of the year.

PGG Wrightson saw its cashflow boosted from $6 million a year
ago to $24.4 million, from operating and investing
activities, which aided it in almost halving its debt during
the past 12 months. Managing director George Gould credited
the improvement to stronger operating earnings across all the
company's major businesses, along with working capital
efficiencies and collection of the Crafar Farms debt in
December, worth about $25 million.

After a 2.2c dividend was declared yesterday, shares in PGG
Wrightson rose 1c to 42c.

''The tougher conditions being faced by farmers clearly
impact on some areas of our business, but overall our
businesses have performed strongly and most have lifted
earnings year-on-year,'' Mr Gould said in a market statement.

Craigs Investment Partners broker Peter McIntyre described
the result as ''meeting market expectation'', but because of
ongoing uncertainty in the beef and lamb sectors, PGG
Wrightson was some way off completing a ''turnaround''.

''It's pleasing for investors, with the dividend, but not
much more as progress still has to be made over the next
couple of quarters,'' Mr Mcintyre said.

Forsyth Barr broker Peter Young remained positive on PGG
Wrightson's outlook in general and the brokerage was likely
to retain its ''accumulate'' stock recommendationHowever, he
cautioned that good rain during autumn in New Zealand and
Australia was needed, to aid planting conditions, which was
now ''key'' to driving a good second-half result from the
company's top seeds and grains division.

Mr Gould was pleased with ''sizable gains'' having been
booked by New Zealand divisions' seed, retail, wool and
irrigation and pumping businesses.

He was also pleased with progress by PGG Wrightson Rural
Supplies and Fruitfed Supplies, both retail businesses facing
intense competition from farmer-owned co-operatives.

Mr McIntyre said much of the 55% boost to profit was from
less depreciation and interest costs being down by $3.2
million on the previous year's result.

The seeds division remained the ''jewel in the crown'', he
said.

During the past year, the company's debt due within a year
had declined from $98.9 million to $49.7 million and
long-term debt was down from $130 million to $82.6 million.

Mr McIntyre said these were ''good reductions'', and gave PGG
Wrightson

more flexibility, should it decide to fund business
improvements.

Mr McIntyre said operating revenues were down about 15%, from
$693.7 million to $589.1 million; PGG Wrightson having noted
a $91.2 million revenue decline because some transactions in
retail were done as agents, not principal seller.

Mr Young said net debt for the period finished at $103
million, which was pleasing given the first half was the
seasonal high point for debt for the company.

''We expect this to continue to fall, given the focus that
management has had on debt reduction over the past three
years,'' he said. Payment of the outstanding Crafar Farms
loans of about $25 million was slightly above earlier
expectations and represented settlement of the debt, subject
to small residual cashflow receipts, PGG Wrightson said
yesterday.

Crafar Farms was placed in receivership in 2009 to a
syndicate of lenders including PGG-Wrightson, followed by a
protracted sale process. All proceeds have now been
distributed to the lenders. The properties were sold to
China's Shanghai Pengxin Group.